Does your LVR not treat you no good no more? Can’t work out if you’re a mortgagee or a mortgagor? Demystify the house buying and home lending process by learning the language.

Home loan and finance jargon

Bridging loans

A loan designed to bridge the gap between the purchase of your new home and the sale of your current home. Bridging loans are short–term loans and for as long as you have one, you’ll be making payments on two loans. Bridging loans are charged at 1% above our standard variable interest rate.

Conditional approval

An offer in principle from the bank of how much they could lend you, with final acceptance subject to the confirmation of certain criteria, like the value of the house you want to buy.

Date of drawdown

The date your home loan is started (drawn down) and the date your interest and repayments are calculated from.

Deposit

When you apply for a home loan you’ll generally need a deposit of 20% of the value of the property you want to buy. This will go towards your home loan and can also be used to pay a sales deposit on the property you want to buy. Once your offer on a property has been accepted and gone unconditional, you’ll generally be asked for this sales deposit. It’s usually 5-10% of the purchase price and is paid to the seller or their real estate agent. It’s counted as part of your overall payment to the seller. 

Discharge of mortgage

When you’ve paid your home loan back to the bank and the bank’s name is taken off the title.

Equity

Take away the amount still owing on your home loan – and any other debts you may have secured against it - from the property’s current market value. This is your equity.

Fixed interest period or fixed term

How long a certain fixed interest rate applies to a loan. Can be between six months and five years.

Fixed interest rate

Means the interest rate won’t change for a set period of time. Find out more.

Fixed rate lock option (FRLO)

An agreement where Kiwibank will hold a fixed interest rate for an extra 30 days over and above the normal period we hold rates. For example, if you get pre-approved for a home loan, we’ll guarantee an interest rate for 45 days from the date we write your letter of confirmation. With a fixed rate lock option, you can extend this guarantee by 30 days, to 75 days. If interest rates fall during your FRLO period, you can take the lower rate.

Floating interest rate

Also known as variable interest rate. It’s an interest rate that can go up or down. Find out more.

Freehold

Freehold is the most common kind of property ownership in New Zealand. If you own a freehold property, it means you own both the land and anything built on it – unless there are any legal restrictions – like covenants, easements of restrictions under the Resource Management Act 1991. It’s sometimes also known as ‘fee simple’ ownership.

Some people (wrongly) use the word freehold, when they mean having a paid-off property. As in, ‘I’m looking forward to my house being freehold’.

Guarantor

If you are a guarantor on a loan, you’re agreeing to pay some or all of the loan if the borrower defaults on payments (i.e. if they stop paying, you have to start paying). Seek legal advice before agreeing to guarantee a loan and make sure you understand what you’re signing up for.

Interest

What the bank charges you on the money you borrow. Expressed as an annual percentage of the amount you borrow.

Instalments

The payments you make to your loan either weekly, fortnightly or monthly.

Lender’s Mortgage Insurance (LMI)

A one-off payment to a third-party insurer, for First Home Loan customers. This insurance usually applies to customers who have less than 20% deposit.

Loan repayment term

How many years it’ll take to pay off your home loan. You can choose a loan repayment term between one and 30 years when you apply for your loan.

Loan to Value (LVR)

The amount you wish to borrow as a percentage of the property’s market value. Find out more.

Mortgage

Although people commonly use the term mortgage to refer to a home loan, it actually refers to the legal document that gives a lender security over your property. This means if you stop paying your home loan your lender can sell your property to cover any potential losses.

Mortgagee

The bank or company that loans the money and holds the mortgage.

Mortgagee sale

If the borrower can’t pay their mortgage and the mortgagee has to sell the property to get their money back.

Mortgagor

The borrower of a home loan.

Payments/repayments

The amount that the loan contract specifies must be paid at an agreed frequency (e.g. weekly, fortnightly or monthly).

Principal

The total amount you borrow. The amounts you repay regularly are usually made up of both principal and interest.

Revolving credit

A revolving credit home loan is a transactional account, which you’ll get a credit limit on - like a big overdraft. You can have ATM access to the account and can withdraw money up to your credit limit whenever you like. There are no set repayments and you can deposit money whenever you like. Find out more.

Security value

The value of the property that the Bank will be prepared to lend against, usually the same as the market value or the agreed purchase price.

Table Loan

With a table loan, the amount you have to repay stays the same each time (except for changes in interest rate). The payments go firstly to pay interest accrued on the loan, and anything left over goes toward the principle amount. At first, you’ll mostly be paying the interest on your loan, but as time goes on you’ll repay more and more of the principal.

Term

Another word for 'period' or 'duration'. This word is used to describe the length of time an interest rate or loan will apply for.

Variable interest rate

Also known as floating interest rate. It’s an interest rate that can go up or down. Find out more.

Real estate jargon

Asking price

The advertised price for a property - the price you actually pay can be different.

Auction

A public sale of property. Prospective buyers bid for a house until the highest price is reached. There’s often a reserve (a minimum price) set by the seller. Once the auction is above this amount, the seller must accept the highest bid.

Body Corporate

A group made up of owners in a block of flats or apartments, who look after running the building and its shared spaces.

Buyer Budget Over (or BBO)

Similar to BEO, but there’s no obligation on the seller to consider offers.

Buyer Enquiry Over (or BEO)

Potential buyers can often expect to pay above this price. If you offer over this amount the seller has to consider your offer.

Capital gain

The difference between the amount you paid for something and the amount you could sell it for. For example, if the value of something you paid $150,000 for goes up to $200,000, your capital gain is $50,000. New Zealand currently doesn’t tax capital gain.

Certificate of title

A document containing the legal description of the property, who owns it and who has a mortgage over it.

Chattels

Items in a property that are usually movable but are considered as included in the sale of the property. Chattels are often listed in the sale and purchase agreement, and can include curtains, carpets, light fittings, and TV aerials.

Code of Compliance Certificate

A certificate in the Land Information Memorandum (LIM) that says the building complies with the Building Act.

Conditional offer

An offer that depends on other factors, e.g. getting a home loan approved (conditional on finance), a satisfactory builder’s report or getting a satisfactory valuation. You or the seller can list as many conditions as you want.

Conveyancing

The process of transferring legal ownership of a property from one person to another. This will be handled by your lawyer.

Covenant

A legal restriction on the property that you must obey - for example, restrictions on the type of structures you can build, or a native tree you must protect.

Cross lease

This is where a number of people share the ownership of a piece of land. Cross leases might be used for flats or townhouses, or for two properties with a shared right of way (e.g. a driveway).

Deposit

When you apply for a home loan you’ll generally need a deposit of 20% of the value of the property you want to buy. This will go towards your home loan and can also be used to pay a sales deposit on the property you want to buy. Once your offer on a property has been accepted and gone unconditional, you’ll generally be asked for this sales deposit. It’s usually 5-10% of the purchase price and is paid to the seller or their real estate agent. It’s counted as part of your overall payment to the seller.

Easement

An order on the title of the property that allows someone to use it in a certain way. For example, run pipes or cables under your land.

Freehold

Describes the form of ownership. Owning a freehold property means you own the building and the land it sits on absolutely - as opposed to a leaseholder (see Leasehold).

GV

Government Valuation. See rateable valuation.

Leasehold

You own the building or house but the land is owned by someone else, who may charge you rent to occupy the land. As long as your lease payments are up-to-date, you have the right to exclusive possession of the building or house for the duration of the lease term.

Land Information Memorandum (LIM) report

A LIM report contains all the relevant information your local council knows about a property or section. Usually it will include information about what building permits or resource consents have been issued, whether the property has had any issues with drainage, plumbing, flooding or erosion. It should also outline details of current rates and if any unpaid rates are owed, as well as information about any protected or heritage buildings or trees on the property or scheduled roads or utilities that may impact the site.

Market value

An estimate of the property value right now – that is, what a buyer would be prepared to pay and what a seller would accept for the property at a point in time.

Marketed without price (MWP)

Similar to Price by Negotiation. It’s uncertain what the demand for a property is, so there’s no ideal price set.

MREINZ

The Member Real Estate Institute of New Zealand www.reinz.co.nz.

Price by negotiation (PBN)

The buyer and seller negotiate until they reach an agreed price. The real estate agent usually acts as a go-between.

Price on application (POA)

The agent will only disclose the seller’s ideal price if the buyer is serious.

Purchase price

How much you end up paying for the property (including chattels).

Purchaser

The person who’s buying the home.

Rateable Value (RV)

This is the value local councils use to help work out local body rates, it’s also known as the capital value. It used to be known as the government value or GV. It’s not the market value of a property. It's generally calculated every three years by your local council by combining a property's land value with the value of any improvements made to the property. The land value is the likely price that would be paid for bare land at the time of valuation – it doesn’t include buildings or other structures, but it does include development like drainage, excavation, retaining walls, grading or protection from erosion or flooding. The value of improvements reflects the value that buildings and other structures add to the bare land.

Sale and purchase agreement

The written contract for a property - usually handled by a real estate agent and a lawyer. The agreement usually outlines your offer, the settlement date and any conditions that must be met before the sale goes ahead.

Settlement day

The date you pay the seller and legally own the property.

Tenancy in common

A way for friends or relatives to own a property together. Each party has a share in the property, and when they die it’s passed on to whoever it’s left to in their will (rather than going to the other party as it would within a couple).

Tender

Buyers submit formal offers (or tenders) by a set date. The highest tender amount usually wins. There are several versions of tenders and you should ask your agent about these. For example, a "tender with reserve" means that once an offer is received above its reserve, it must be accepted.

Title

A document containing the legal description of the property, who owns it and who has a mortgage over it.

Unconditional offer

An outright offer to buy with no conditions attached. An offer also becomes unconditional once any conditions have been met, e.g. getting a valuation report from a registered independent valuer. See "Conditional offer".

Unit title

Allows people to individually own an apartment, unit or flat in a building, with multiple ownership of the common spaces and facilities like driveways and elevators.

Valuation

A written report of the current market value of a property, prepared by a registered independent valuer.

Vendor

The person selling the property.

Kiwibank’s lending criteria, terms and conditions and fees apply.